Bandy v. Bank Line Ltd.

• Decision Date: 30 December 1977
• Docket Number: Civ. A. No. 77-716-N.
• Citation: 442 F. Supp. 882
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Melvin BANDY, Plaintiff, v. BANK LINE LTD., Defendant.

442 F. Supp. 882

Melvin BANDY, Plaintiff, v. BANK LINE LTD., Defendant.

Civ. A. No. 77-716-N.

United States District Court, E. D. Virginia, Norfolk Division.

December 30, 1977.

C. Arthur Rutter, Jr., Breit, Rutter & Montagna, Norfolk, Va., for plaintiff.

John R. Crumpler, Jr., Seawell, McCoy, Dalton, Hughes, Gore & Timms, Norfolk, Va., for defendant.

OPINION AND ORDER

CLARKE, District Judge.

The plaintiff, an employee of a stevedoring company, was injured while working as a longshoreman on a vessel owned and operated by the defendant. The injury occurred on the waterfront in Newport News, Virginia, within the jurisdiction of this Court.

In this action the injured longshoreman, alleging negligence, is seeking recovery from the owner of the vessel. The plaintiff admits that this action was filed more than six months after termination of the statutorily required compensation payments made by the employing stevedore to the longshoreman. The case is presently before the Court on the defendant's Motion for Summary Judgment on the ground that the plaintiff has no cause of action.

It is the defendant's position that the plaintiff's failure to bring an action against the vessel owner within six months of termination of compensation payments¹ resulted in a statutory assignment from the injured longshoreman to the employing stevedore of the exclusive right to proceed against the vessel owner pursuant to section 33(b) of the Longshoremen's and Harbor Workers' Compensation Act hereinafter cited as LHWCA, 33 U.S.C. § 933(b).

The plaintiff asserts that six months after a compensation award the assignment under 33 U.S.C. § 933(b) creates in the employing stevedore a superior but not exclusive right to seek recovery from third persons allegedly responsible for the longshoreman's injuries. The plaintiff refers to a line of cases beginning with Czaplicki v. The Hoegh Silvercloud, 351 U.S. 525, 76 S.Ct. 946, 100 L.Ed. 1387 (1956), as authority for the proposition that when there is a conflict of interest between the longshoreman and the employing stevedore and when the stevedore does not proceed against the third person, the longshoreman will be allowed to bring an action against that third person more than six months after a compensation award has been made.

The defendant's position with regard to that contention is that the 1972 amendments to the LHWCA have removed the traditional conflict of interest that was created by indemnification of vessel owners by stevedores, and that therefore the pre-1972 cases, which recognize that conflict and allow a longshoreman to institute an action more than six months after a compensation award, are inapplicable here.

Section 33(b) of the LHWCA, 33 U.S.C. § 933(b), reads:

(b) Acceptance of such compensation under an award in a compensation order filed by the deputy commissioner or Board shall operate as an assignment to the employer of all right of the person entitled to compensation to recover damages against such third person unless such person shall commence an action against such third person within six months after such award.

The plain language of the statute is clear: unless the longshoreman brings an action against a vessel owner within six months, he loses the right to bring such an action and must rely on his employer, the stevedore, to bring the action, if one is to be brought. In most circumstances, the longshoreman would be entitled to a portion of any recovery had by his employer, 33 U.S.C. § 933(e).

Although the United States Supreme Court in Czaplicki v. The Hoegh Silvercloud, 351 U.S. 525, 76 S.Ct. 946, 100 L.Ed. 1387 (1956), recognized the exclusivity of the assignment under 33 U.S.C. § 933(b),² the Court created an exception to that exclusivity.

In giving the assignee exclusive control over the right of action, however, we think that the statute presupposes that the assignee's interests will not be in conflict with those of the employee. . . . Here, where there is such a conflict of interests, the inaction of the assignee operates to defeat the employee's interest in any possible recovery. . . . In this circumstance, we think the statute should be construed to allow Czaplicki to enforce, in his own name, the rights of action that were his originally.

Id. at 531, 76 S.Ct. at 950. The Court stated the basis for the determination of conflict of interest: the compensation carrier of the employer in Czaplicki was also the insurer of the third party defendant most likely to be held liable. "The result is that Czaplicki's rights of action were held by the party most likely to suffer were the rights of action to be successfully enforced." Id. at 530, 76 S.Ct. at 949. The Supreme Court determined that

Czaplicki can bring this suit not because there has been no assignment, but because in the peculiar facts here there is no other procedure by which he can secure his statutory share in the proceeds, if any, of his right of action.

Id. at 532-33, 76 S.Ct. at 951 (emphasis added). The effect of the decision in Czaplicki, however, extended far beyond "the peculiar facts" of that case.

In Johnson v. Sword Line, Inc., 257 F.2d 541 (3d Cir. 1958), the Third Circuit reached the same result as the Supreme Court had in Czaplicki even where there was no identity of insurance carriers. The Court had commented, in an earlier opinion in the same case, that the employer and the employer's compensation carrier

may not be permitted to stand pouting in a corner like a sulky milkmaid at a barn dance and simply refuse to bring suit without adequate reason.

Johnson v. Sword Line, Inc., 240 F.2d 954, 956 (3d Cir. 1957). The Court, in its later opinion, required the compensation carrier, who was not a party to the action, to prove no conflict of interest. In the absence of such proof, the injured longshoreman would be allowed to proceed.

Failure to bring an action was translated in Johnson into a prima facie showing of conflict of interest. See 257 F.2d at 545-46. The translation, however, was not without basis. Under Ryan Stevedoring Co. v. Pan Atlantic Steamship Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956), a vessel owner found liable to a longshoreman injured as a result of the unseaworthy condition of the vessel was entitled to recover damages, when appropriate, from the stevedore under a theory that by a breach of the warranty of workmanlike service the stevedore or its employees caused or contributed to cause the condition on the vessel which gave rise to the longshoreman's recovery. This contractual or warranty of workmanlike service obligation to indemnify the vessel owner, in conjunction with 33 U.S.C. § 933(b), had the practical effect of putting the assignee employer in a position where by suing the vessel owner to recoup its compensation payments it exposed itself to possible claim for indemnification of a larger judgment against the vessel owner. The result is a corollary of Judge Brown's observation in Strachan Shipping Co. v. Melvin, 327 F.2d 83 (5th Cir. 1964) (dissenting):

In this sometime weird Ryan-Yaka world, there is only one thing certain: no stevedore in his right mind wants, or encourages, a suit by an injured employee against a third party vessel or vessel owner.

Id. at 90.

The expansion of Czaplicki in Johnson was not unique. The Court in Smith v. A. H. Bull Steamship Co., 208 F.Supp. 172 (D.Md.1962), borrowed heavily from Johnson and required a heavy burden of proof from the insurance carrier, who was the third party defendant, to establish that conflict of interest was not a factor in the decision not to sue the vessel owner.

Where the factual situation was similar to Czaplicki, the courts that considered the conflict of interest exception to 33 U.S.C. § 933(b) could rely on the identity of the insurance carriers for the vessel owner and the employer to establish conflict of interest, Castro v. United States, 230 F.Supp. 967 (D.P.R.1964). But where that coincidence did not occur, the courts either (1) maintained, without explanation of the manner of proof, that where there is conflict of interest the longshoreman may proceed more than six months after a compensation award, McClendon v. Charente Steamship Co., 348 F.2d 298 (5th Cir. 1965); White v. United States, 507 F.2d 1101 (5th Cir. 1975); or (2) followed the line of cases from Johnson v. Sword Line, Inc., supra, that expanded the exception from peculiar facts that could establish a conflict of interest to a presumption of conflict of interest whenever the employing stevedore does not sue the vessel owner, Allen v. United States, 235 F.Supp. 950 (N.D.Cal.1963), aff'd, 338 F.2d 160 (9th Cir. 1964), cert. denied, 380 U.S. 961, 85 S.Ct. 1104, 14 L.Ed.2d 152 (1965).³

The furthest distance traveled to protect the employee's right of recovery was by the D.C. Circuit in Potomac Electric Power Co. v. Wynn, 120 U.S.App.D.C. 13, 343 F.2d 295 (1965), where it was held that a showing of conflict of interest was not a prerequisite to a suit by a longshoreman more than six months after a compensation award. The Court concluded that the 1959 amendments to the LHWCA exhibited an intent to facilitate the employee's access to recovery noting that section 33(a) of the LHWCA eliminated election between statutory and common law remedies, that section 33(b) established a six-month grace period during which the employee had the exclusive right to proceed against third parties and that the twenty percent share of the net recovery awarded the employer in section 33(e) created an incentive to protect the employee's rights. The Court not only determined that it would be a burden inconsistent with the purposes of the amendments to require an employee seeking recovery from a third party to prove his employer's conflict of interest, but more importantly the Court stated that

even if the employer-assignee had "proper motives" or did not abuse a "fiduciary duty to the employee" in failing to sue the third party, no

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